Annual Warranty Labor Rate Increase – I’ve Got That Handled

by Joe Jankowski | June 13, 2016

Joe Jankowski

Joe Jankowski serves as the Managing Partner of Armatus Dealer Uplift, a firm specializing in Retail Warranty Reimbursement submissions. Joe has been personally involved in consulting on 9 retail warranty statutes, and is widely recognized as a subject matter expert in this highly technical arena. Previously, Joe spent more than 20 years as CFO, COO and CEO, of a large automotive group in Maryland.  Armatus has performed over 3,000 successful retail warranty submissions to 24 manufacturers in 40 states.

As a dealer, you should ask yourself 3 basic questions in regards to your annual warranty labor rate increase:

1. Do I have my annual warranty labor rate anniversary date recorded, and do I have a process in place to make adjustments prior to it, in case I don’t have adequate data to support an increase?

2. Am I certain that the person responsible for the increase performed the work timely, so that we did not forfeit any profits?

3. Is the rate I submitted my best possible rate, and do I have evidence to give me the confidence that I didn’t leave anything on the table?

If you cannot answer yes to all 3 of these questions, it’s costing you money.

Our team has been in the retail automotive world for over 25 years, so we realize the annual warranty labor rate increase typically looks something like this: Someone in the dealership may or may not be tracking the annual due date, or more properly stated, opportunity date, that the rate increase is due. Once someone decides it’s time to submit, a decision then has to be made as to who is going to do the work. After that, someone has to interrupt his or her duties, taking time away from customers, inventory, employees, etc., to perform the grunt work of putting the request together. And in the event that there are issues with the manufacturer, which there sometimes are, they have to be dealt with. All in all, it makes for a less than desirable set of circumstances.

Case in point: we recently spoke with a dealer who has been trying to get his labor increase since January, and still doesn’t have an approval. His service manager put together the request, and his field rep said “why don’t you just let me come in and pull the ROs for you?” Needless to say the rate dropped from the service manager’s calculations. Further confusion was caused by the request referencing the state law. The dealer was flat out denied by the Zone, and told to call the national warranty hot line to discuss a statutory submission. At this point, and after over 30 pages of correspondence, the dealer threw his hands up, and proceeded to secure professional help to rectify the situation. Now, this is a pretty extreme case, but we hear these stories in various forms all day long.

Having worked with over 1,800 dealers in 37 states, we can assure you that your annual warranty labor rate increase is much less controlled than it could be. We recognize that you have confidence in your managers, but let’s be realistic, this is a “side-bar” focus at best, and a better process would definitely give you the assurance that this area is completely buttoned-up. Even those utilizing the various service data analysis tools are working with less than perfect science; these folks are reliant on the precise usage of op codes by the advisors to determine the best rate. We can assure you that nothing but detailed analytics on the underlying data, combined with a full audit, can yield the best possible result. And when it comes to a statutory submission, well, let’s just say it’s a complicated process requiring knowledge of the law and the manufacturer’s protocols.

Just like your lawyer or CPA in their respective highly specialized areas, a professional services firm can give you peace of mind in the warranty arena. We think in most cases it would make sense to at least explore what true professionals can do to ensure you are getting the best, most timely result possible.

For more information, Contact Armatus Dealer Uplift: 888-477-2228 or Armatus has performed over 2,600 successful retail warranty parts submissions to 24 manufacturers in 40 states.

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About Armatus

Armatus' Proprietary Technology delivers unrivaled Warranty Parts Reimbursement, Warranty Labor and Customer Pay Mark Up rates. Armatus has invested thousands of hours into proprietary software that has one purpose - to optimize dealer profits.

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